It has been long speculated that physical money will no longer be the norm to buy goods. However, has fiat money died?

Not yet, but it has witnessed a significant decrease in use. Euromonitor released a report that said card payments (45%) have surpassed cash payments (31%) in the UAE. By 2020, cash transactions are expected to go down to 28%, according to the report, indicating that the UAE is moving into a cashless future.

“Cash has long been regarded as the best way for shoppers to budget, as there is a physical action associated with it,” CNBC said.

“In other words, as shoppers take the money out of their wallet and count out the bills, there are multiple reminders that they’re making a payment,” CNBC added.

“If you’re actually handing over physical cash, you can reflect on what it took to get that cash,” Ross Steinman, chairman and associate professor in the psychology department at Widener University, told CNBC.

On the flip side, he told CNBC that it’s easier for shoppers to disassociate from the money they’re spending when they swipe a piece of plastic.

A study by the Banking University of Hochiminh City said that people are over 1% inclined to pay more when using a credit card compared to cash.

That 1% is significant when you factor that, in 2017, UAE card transactions stood at $59 billion; 1% here is around $600 million of increased spending.

CNBC claims the spending gap is much higher, where credit card use causes consumers to spend 12% to 18% more.

“People spend significantly more when they’re using a credit card,” said Steinman to CNBC. “If we take that idea and extend it to mobile payments, I would expect that to be at least in [the 12% to 18%] realm, perhaps a little bit more.”

We calculate this to be between $7 billion and $10.6 billion extra spending when we factor last year’s card and mobile transactions in the UAE.

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